A topic that never gets old.  Through all the ups and downs of the Haynesville Shale Play, the offers keep coming.

So, do mineral companies know something that I don't?

Depends on what you know.  Yes, mineral buyers search a lot of the the public record data available though not all.  The level of due diligence varies.  Some send letters based on tax records.  Easy but not the best way to identify LA mineral owners.  LA does not tax minerals even if producing.  LA taxes surface owners who aren't always the "owner" of the minerals.  Think a boiler room sending out form letters.  Volume is the key because the number of replies are so small.  A reply does indicate the possibility of someone interested in selling.  A that point a company may invest a little time in researching the public record data to see if maybe the minerals do have a value.

A more targeted means to send letters is to first look at what's coming.  In LA before a horizontal well is drilled, it must receive spacing approval.  Applications for alternate wells are not well permits.  The application is required to approve a lateral path that has the requisite set backs from unit boundaries and adjacent well laterals.  Once approved as a Field Order, an operator may apply for a permit to drill that is effective for six or twelve months at different fee costs.  Some buyers will see an alternate well application for an area and/or an operator they like and then search the public records to find out who owns minerals in that location.  The best way to do that is to look up the unit survey or surveys for the sections where the well(s) will be producing.  Then a search of the parish public records to find a mailing address for an owner listed or that owners heirs.

Minerals with a field order have a good chance of new wells in the future but the order is good indefinitely and there is no time frame requirement for a well or wells to be drilled.  A field order may approve spacing for 1 to 12 wells depending on the application and the location of the minerals.  That doesn't mean that an operator plans to drill all of them at once.  After receiving a field order, good indefinitely, they can choose to drill as many or as few as they see fit often over years.  It's easier to get the spacing approval once than to come back and go through the process again and again.

What are minerals worth? The simple answer is, what someone is willing to pay you for them.  The value equation for mineral owners is actually pretty simple and can be done with a little practice.  The value is based on current royalty income and remaining reserves.  The remaining reserves are usually the more important value element.  The number of horizontal wells per section varies currently depending on the spacing of the existing wells, if any.  Where a new unit is being developed, operators currently drill five or in a few cases six horizontal wells.  The state allows up to eight but with the now common high intensity fracks, operators feel they can effectively drain the section with fewer wells.  You can look up the well plats for the existing wells in the SONRIS database and figure out the remaining un-drilled slots.  If your minerals have only Haynesville Shale reserves (generally north of the 13 North Townships), you will only get five to six wells total.  Subtract what has been drilled and that gives you a back of the envelope estimate of remaining reserves.  For those 13 North and south from there, there should be both Haynesville and Bossier shale reserves with a few exceptions, so twice that number, ten to twelve.  Once again subtract the drilled wells and you have the number of potential future wells that may be drilled.

See the attached Arete offer letter.  This is the old approach that focuses on current monthly royalty payments and a multiple to come up with an offer amount.  This avoids putting an offer amount in the letter and ignores the value of remaining reserves.  Obviously not a good starting point for negotiations. 

An offer may be based on net mineral acres or on royalty acres.  A royalty acre is one mineral acre at a one eighth royalty fraction.  If you have a quarter royalty, you have two royalty acres for every one mineral acre.  An offer of $6k per mineral acre is the same as an offer of $3k per royalty acre based on a quarter royalty.  Many mineral companies want to talk mineral acres to mineral owners but talk in royalty acres to each other as that includes the royalty in the calculation of the offer amount.

In all cases, seller beware.  And do your homework.  Good luck, Skip